Options Corner: JBHT Hits Brakes on Stock Momentum into Earnings

Diane (0:00)

So on the earnings front, JB Hunt set to report its quarterly results after the bell today. Wall Street is expecting a buck 81 in adjusted earnings for share, and more than three and a half billion in revenue for the quarter. Now, keep in mind, Bernstein recently lowered its price target on the company to 307 It's down from 329, but it is still bullish. It kept its outperform rating. The firm taking its estimates for 2027 higher, as it expects the repricing opportunity to be better than what the street is baking in. Time now for Options Corner. Joining us now to take a deeper look at the charts is Rachel Dashiell, head of Technical Research and Strategy, Schwab Center for Financial Research. So Rachel, I know you've got a couple charts for us. You've got to look at the one year first.

Walk us through that or drive us through that.

Rachel Dashiell (0:42)

I'll definitely drive you through that. So good morning, Diane. Great to join you. So looking at just a one year daily, JB Hunt, after forming this head and shoulders topping formation, price found support at its anchored, a volume weighted average price from those yearly lows. We can see that this level actually aligns with the zone from former highs of early this year. So potentially a place where price can find a little bit of rest. Now, if we look down at momentum with the RSI, we can see just recently with this latest push to longer term support, we had a momentum with the RSI becoming oversold, and it's giving us a slight bullish divergence here when price made lower lows, momentum made a little bit of higher lows. So I think this could be the place where JBHT starts to form at least a short-term bottoming process around these longer term support levels around 225 Now, in the short-term resistance will be that gap from mid-September around $250, Diane.

Diane (1:44)

Okay. So one year looks good. Let's zoom out. You've got to look at the five-year chart. What should we notice there?

Yeah.

Rachel Dashiell (1:53)

So the five-year really puts these levels that we're seeing in the shorter-term chart into perspective. So the pullback that we saw this year really occurred at a logical level of longer-term support looking at a five-year. A lot of times during these corrective phases, this is typically what we see. I mean, we see this all the time with the major indexes as well. So as long as price holds these prior cycle highs around this 220 zone, the pullback does remain constructive for the broader trend. And we can see on the longer-term chart using a different momentum gauge with the MACD, the Moving Average Convergence Divergence. We can just see how MACD recently with this last week crossed into a bearish momentum regime with that MACD long crossing below zero. But the downside momentum appears to be waning at least here on the weekly. So I think a bottoming process could occur here, especially if the broader bull market remains intact and industrials hang in here.

Diane (2:52)

Okay. You've got an example trade. You want to drive us through that approach?

Rachel Dashiell (2:58)

Of course. We see a little bit of higher volatility in JBHT here. An IV percentile of about 75

Telling us it may be a little bit more of a better time to be selling options, especially coming up on earnings later this afternoon. So we're going to look at the 220 level that we saw from longer term support. We're going to sell a bull put spread at these levels. So selling the 20th of November, looking a little bit more than a month out, buying the 210 put, selling the 220 put. And here this would create a little bit of a higher probability trade, close to a 70 percent profit. If the price of the stock does kind of expire above our short strikes like we are hoping. Now the most that we can capture here is going to be the credit. So it's going to be that 285 We are risking to the downside is the difference between those strikes minus the credit that we're collecting. So roughly about $715.

So our risk is defined in this trade.

Diane (4:06)

All right. Thank you, Rachel. Appreciate that example trade there. That's a trip through the charts for JB. Hunt ahead of its quarterly results.